SKS Microfinance pounded again — 12th session in a row

Shares of SKS Microfinance tumbled for the twelfth consecutive session, losing a further 19% to close the day at Rs270.80 a share.

The embattled-company, which reported dismal results for last fiscal, saw shares drop 20% on Friday after JP Morgan flagged challenging times ahead and cut its share price target by more than half to Rs200 from Rs550.

The latest closing price is off over 75% from its listing price of Rs1,088.58 on August 16 last year and over 80% from its peak of Rs1,402.30 seen on September 28.

On Friday, SKS reported a loss of Rs69.7 crore for the quarter ended March, compared with a net profit of Rs62.9 crore in the same period last year, hurt primarily on account of lower repayment rates. SKS chief financial officer Dilli Raj told DNA on Friday that the company’s financials were sound and results took a hit as it “took a conscious decision to adopt more stringent provisioning norms,” referring to the company’s higher provision for write-offs.

SKS Microfinance scrip has ended in the red for the last 12 trading days at BSE, allowing Narayana Murthy-led Catamaran to dilute its 1.3% stake in it. Although Murthy’s venture capital company remains locked in the listed microfinance company until January 2012, DNA learns that Catamaran holds the right to sell the stake if the weekly closing average of the company fell below Rs400. The weekly closing average as on Friday stood at a little over Rs406.

“I don’t think they (Catarmaran) would like to exit now. They’ll hold on for now as it won’t be a sound financial investment for them,” said a Mumbai-based analyst at a foreign brokerage, who tracks SKS. Catamaran bought a 1.3% stake in the Hyderabad-based SKS at Rs300 a share in January last year.

An email sent to Catamaran went unanswered.

On Monday, a Crisil report said that growth prospects for microfinance institutions will remain subdued over the medium term and the sector could see a little consolidation.

“The MFI sector’s growth is likely to remain subdued over the medium term, especially in regions with high microfinance penetration, because of proposed regulatory restrictions on multiple lending, loan size, and end-usage of loans. This will provide an impetus for consolidation in the sector,” Rupali Shanker, head, Crisil Ratings, wrote in a note.